updated 06:36 pm EDT, Fri May 25, 2012

ZTE allegedly sold embargoed US hardware to Iranian telecom

Chinese telecommunications equipment manufacturer ZTE is reportedly under investigation by the US Department of Commerce over alleged sales of embargoed US computer equipment to Iran. Commerce Department officials close to the investigation tellReuters that the department is aggressively conducting its investigation, and fines for ZTE could range into the tens of millions of dollars.

A Reuters report earlier this year claimed that, among other items, ZTE sold servers from IBM, switches from Cisco and Brocade, database software from Oracle and EMC, backup and antivirus software from Symantec, and a Juniper Networks firewall to Telecommunication Co of Iran (TCI), which is controlled in part by the Iranian regime.

When news broke of the deals, ZTE spokespersons announced that the company would curtail its business with Iran, later amending that statement to note that the company was limiting business with existing customers and would no longer seek new customers in Iran. Upon the revelation of additional dealings with Iran, the company abandoned multiple sales agreements, claiming that ZTE was unaware that said agreements involved embargoed products.

Officials familiar with the investigation have said that some US companies have received subpoenas regarding their dealings with ZTE, though the officials state that there is no evidence that those companies--which include Microsoft, IBM, HP, Oracle, and Dell--were complicit in the Iranian transactions.

The United States has long maintained an embargo on the sale of American-made tech products to Iran. ZTE is a Chinese company, and China does not maintain or support the same bans on Iranian sales. Nonetheless, the US has previously penalized foreign companies for violating US sanctions.

Should the Department of Commerce bring charges against ZTE, the company could be liable for for fines of double the value of any US products included in the deals. News of the investigation comes at the end of what has been a difficult week for ZTE's image. Last Friday, news broke that at least one, and possibly several, of the company's smartphones was vulnerable to hardwired password exploitation, dealing a serious blow to ZTE's hopes of improving its brand in order to compete with the likes of Apple and Samsung in the American smartphone market.